Pay awards offered by UK employers have dropped to the lowest percentage in almost two years, according to a new survey.
Findings from Incomes Data Research revealed the median pay deal agreed by organisations fell to 4% in the three months to July, down 0.8 percentage points from the three months to June, and the lowest since August 2022.
The latest figures do not include settlements that were agreed in April, which is generally the most popular time for securing new deals. During this month, 16% of awards were for 9% or more, in part because of a 9.8% increase in the minimum wage.
IDR senior researcher Zoe Woolacott said that wage levels were not yet matching the surge in the cost of living over the past two years, despite consumer price inflation now almost reaching the Bank of England’s target of 2%.
She said: “Prices for items such as food, as well as mortgages and rents, remain higher than before the pandemic. This maintains pressure on employers to award their workers with a pay rise that compensates them to some extent for the higher cost of living.”
Next week the BoE is expected to keep interest rates at 5% as it closely monitors pay growth. It is anticipated that private sector wages will drop to 5% later in 2024 and to 3% late next year.
Figures released on Tuesday (10 September) by the Office of National Statistics indicated that UK wage growth had slowed in the three months to July, dropping to 5.1% and its lowest level in more than two years. The last time it dropped below this was in the quarter to June 2022, when it was 4.7%.
The IDR survey considered 39 pay settlements which took effect between 1 May and 31 July 2024, covering more than 700,000 employees.
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